Why America has lost its smile

Press, 22 September 1987, Page 12

Why America has lost its smile

The ‘Economist’ examines America’s loss of some of its self-confidence

Americans were not born to frown. It does not suit them.

The quintessentially American characteristics are cheerfulness, optimism and generosity, a general buoyancy of spirit, a belief that tomorrow will dawn a better day. So it may, but suddenly many Americans seem not so sure. - ’

They learnt, more than a decade ago, of the limits to their military power, yet they still believed themselves pre-eminent in more pacific arts. They reckoned.their economy to be incomparable; now they find it often outsold by Japan, Western Europe and a string of eager newcomers. They imagined their Incomes would for ever rise; now they see them struggling with gravity. They thought they had at last a two-term President of whom they could be proud; now they are embarrassed. They assumed the American Century, born 1941, would endure a hundred years; now, after fewer than 50, they fear it is on the wane. No wonder a frown can be detected on their faces. It is born of bafflement The frown is not universal; nothing is in America. It is not even pronounced; many Americans continue to show the same energetic faith in the future that their fathers and forefathers showed, and others are too well mannered to let apprehension spoil their appearance. But signs of unease abound. ■ ;

They assault the senses of visitors who remember the exuberant “It’s morning in America” mood of the nation only a few years ago. And some of these signs reflect not just bafflement, but,sulkiness, defensiveness and pessimism. If these attitudes prevail, America will become a different place, one that allies and antagonists alike will find it harder to live.with.

To foreigners, the most alarming .sign is /protectionism. Congress returned to Washington this week to reconcile the trade bill passed by the House of Representative with that passed by the Senate. Both would oblige the President to take action against countries that are too successful at selling to Americans the goods they want to buy. All but the most economically illiterate congressmen will admit in private that the forthcoming bill is likely to do damage, not good. They will vote for it, however, because “something has to be done about the trade deficit” — the stubborn SUSISO biilion-plus gap between the export and Import of goods. If something, why this? For different congressmen the motives may be chauvinism, populism, Ignorance, appeasement (for fear of worse) or just despair. Trade protection, however, is not the response of a selfconfident person: it is a sort of considered tantrum, the nonviolent equivalent of smashing foreign radios on the lawn of the Capitol.

Do something, anything, with no regard to logic is also the impulse behind those who want to tackle America’s other durable deficit, that of the Federal Budget, with, of all things, a constitutional amendment They know, as everyone know,s that if

the Government spends more, than it raises, it will run a deficit ’ - •>. But rather than cut spending - or raise taxes, they would wave ag constitutional wand to. banish deficits from the ; land. Such '• Solutions make voodoo economics look smart

The Budget deficit has .;.not been all bad for America, or for its trading partners. It helped to lift the economy out of recession in 1982, and to give America two years of cracking growth. .By then it was outliving its usefulness, serving mainly to swell the trade deficit and thus the protectionist chorus. It has turned the world’s richest country into its biggest debtor and put into the mouths of Americans yet unborn not sliver spoons but IQUs: the gross Federal debt has more than doubled during Mr Reagan’s term, to over SUS2 trillion (SUS2 million million). In other words, America has been living beyond its means — partly because its means have failed to expand as once they, did. Middle-class families find the growth in their real incomes by sending their women out to work, not by higher salaries. Real average earnings rose steadily from 1947 to 1972, in all by more than half. They have fallen, less sharply but almost as steadily, ever since, so that now

they are back to the level of 1962.

To be sure, America is still a remarkably efficient job machine. Yet even people in work can no longer be assumed to be prosperous, whereas those out of it can increasingly be assumed to be wretched: unemployment benefits and welfare payments, never generous in most states, have generally failed to keep up with inflation. Despite tax reform, no one is sulkier than the taxpayer. In the circumstances, it would be odd if Americans did not take a more sober view of the future than they used to. Faltering growth in the standard of living

is not the stuff that dreams are made on, certainly not the American Dream (a poll by the “Wall Street Journal” earlier this year suggested that 45 per cent of Americans believe the American Dream to be harder to achieve than in the past, and 55 per cent think it will become harder still).

The pessimism, however, can be seen not just in the economic expectations of Americans, nor even in their fears about drugs and crime and poor education. It shows, for example, in three of the least likely places and moods.

First, California. For years, California has led America — not just in cults, riots, triple garages and topless shoeshines, but ifl scientific research, educational excellence and enlightened state government. At its apex, California’s education is as sharp as ever. But lower down, it is suffering from the pinchpenny consequences of taxpayer revolts and the lacklustre outlook of those who run the Golden State. Proposition 13 and its 1979 successor, both limiting public spending, threaten to institutionalise mediocrity in state government Second, international- institutions. This year has seen the fortieth anniversary of the Marshall Plan, perhaps the greatest example of national generosity in history (2 l / 2 per cent of American G.N.P. in the first year alone). And America’s lead in international affairs after the second world war was not confined to rebuilding Europe; it encompassed the setting-up of the United Nations, N.A.T.0., the Bretton Woods monetary system and a network of alliances across the globe. For good reasons as well as bad, Americans are now more inclined to thumb their noses at internationalism than to echo the ideals of, for instance, the preamble to the U.N. charter.

Third, defeatism. Optimism, not necessity, has always been the mother of invention in America. To every problem — whether racial bigotry or putting a man on the moon — there has always been a solution, if only ingenuity and money were committed to it. No longer. It is now possible to hear Americans shrug and say, “We have tried and

This is true not just of drugs and crime, but of one-problem in particular poverty. After decades of experiment, more than 32 million Americans, 13.6 per cent of the population (and nearly 20 per cent of children), still live below the poverty line. An underclass, isolated from mainstream America and stubbornly resistant to incorporation within it, is now accepted by many as a fact that society can hope only to recognise, not change. ; ’

Defeatism is certainly not a characteristic of Ronald Reagan. But the new mood owes much to a new, and more sombre, assessment of the Reagan presidency among Americans at large. Even before the Iran-contra affair broke, the Democrats had regained control of the Senate, doubts were growing about the

health of the economy and it was clear that President Reagan had restored public acceptance for the use of force abroad only when this involved short, sharp, “safe" operations like Grenada and Libya. Misgivings are widespread about America’s current operation in the Gulf. A swift triumph would bring applause, a long struggle merely calls for withdrawal. *

Was the soaring eagle of three years ago then borne aloft on nothing more than a thermal of hot air from the White House? No, the scotching of inflation (thank Mr Paul Volcker, the recently retired chairman of the

Federal Reserve Board for that) and the defence build-up were real enough, and in any event the President has few weapons more potent than hot air: what else did Teddy Roosevelt dispense from his "bully pulpit”? But the institution of the presidency, wounded by Vietnam, Watergate and the disappointments of Jimmy Carter, has not yet been repaired. The new mood should not be exaggerated: it is one of doubt more than of despair, and it is not yet clear how broadly it extends or how long it will endure. The American body politic may just be breathing out before swelling once more with another life-giving lungful. The likelihood is, however, that Americans will continue to moderate their expectations and to grow a bit more cynical, a bit less boisterous. The world they ran after the Second World War was a world that could not last Their share of gross world product was then 40 per cent; today it is barely a quarter. Their share of world trade was 22 per cent today it is 9.5 per cent Other countries were bound to increase their share of the economic cake, and with it their capacity to shrink America’s power. :■ \ Americans grumble today that ' the burdens of world power and responsibility are unfairly distributed. They are right America’s allies must do more; indeed they may have to learn to live in a, , world without a pre-eminent Western leader. But the. United « States need have no causeto > sulk. ■ ’ j On the contrary, thfi..WPrid t todey Is better disposed towards £ democracy and capitalism/than ? at any moment in the past 40 : years. It would be absurd Indeed if America turned its back on that world just as it is embracing , America’s values. Copyright — The Economist ‘

‘Earnings have fallen back to what they were in 1962’

‘The new mood is one of doubt rather than despair’